Accounting theories are necessarily abstraction of reality because accounting is human activity and the positive accounting theories consider people’s behaviour and needs (Deegan & Unerman, 2011, p. 5). According to Deegan and Unerman (2011, p. 5), some accounting theories are empirically based and supported by numerous observations of real world. And because it is hard for the board theories to apply to the specific situation individually even though they can be used generally. (Deegan & Unerman, 2011, p. 25). This indicates that accounting theories need to align with the changes of real situations and be abstraction of reality, which can be more reliable with the different pheromones.
Accounting theories are used to explain existing practices and procedures to obtain a better understanding (Unegbu, 2014, p. 2). And it is pertinent to understand the meaning, scope and application of a theory in humanities and management sciences in order to appreciate the work of accounting theory (Unegbu, 2014, p. 1). As a result, the development of accounting theories was heavily relying on testing and understanding human practices in the real world. In economic design, positive accounting theory approach states that any proposal may not be valid unless it is verified empirically, and the accounting information also affect the investors’ behaviour (Slaheddine, 2014, p. 4). Accounting theories comes from the human activities and play an significant role in the reality to reflect the real world.
It is possible to make some very broad generalizations in developing social science theories, but the way these board generalizations apply to specific situations will vary according to the specific individual factors applicable situations (Deegan & Unerman, 2011, p. 25). Accounting theories need to make changes for adjusting the differences in the social world, otherwise it is difficult for accounting theories to apply efficiently to the situations, which indicates that accounting theories are abstractions of reality. For example, accounting’s social dimension remains attached to the individual contingencies and influenced by the thought that dominates manager’s strategies, and rules remain as a combination of each country’s specificities in each period (Slaheddine, 2014, p. 3). Hence, the theory created important insights about the relationship between accounting value and Return on equity and the motivations of management financial reporting (Ghanbari, Manesh, Khorasani, & Nejad, 2016, p. 179). These two examples demonstrate the importance of the changing environment for accounting theories. Accounting theories have to adapt to the reality as a result of making right decisions.
In conclusion, the solutions of accounting problems come from the real world and needs observations from real world. Accounting theories are developed on the basis of past observation, supported by undertaking numerous observations of actual phenomena and make predictions are more likely occurrences (Deegan & Unerman, 2011, p. 5). Accounting theories are necessarily abstraction of reality, it is consistently developing with the social reality and human activity.